Wall Street on Draghi watch as ECB meets

European Central Bank (ECB) president Mario Draghi gives a press conference following ECB’s governing council meeting on May 8, 2014 in Brussels. Draghi gave the strongest hint possible of an imminent cut in eurozone interest rates at the June meeting. (Photo: JOHN THYS/AFP/Getty Images)

It isn’t a Fed meeting, and Fed chief Janet Yellen isn’t speaking. But it’s being watched just as closely by Wall Street. The meeting in question? The European Central Bank, which gathers today, when it is expected to announce bolder stimulus measures to combat dangerously low inflation that threatens the euro-zone recovery.

Adding to the angst: leading hedge fund manager, David Tepper of Appaloosa Management, warned last month that the U.S. stock market was getting “kind of dangerous.” He fears that slow growth in the U.S. will worsen if the ECB doesn’t take aggressive action. “The ECB better ease in June, I’m nervous,” he said at a hedge fund conference on May 14 in Las Vegas.

Upping the ante even more, at the ECB’s May meeting, its chief Mario Draghi hinted that he was ready to loosen policy further, raising the market’s expectations for action. Wall Street is expecting a few possible measures. The ECB is expected to cut interest rates further, with its “refi” rate getting trimmed to 0.10% from 0.25% and its deposit rate slashed to negative 0.10% from 0%. Draghi could also introduce “targeted” liquidity measures to encourage banks to lend. Large-scale asset purchases, similar to the Fed’s bond-buying program, are also on the table. But “there’s only an outside chance of such a program being introduced,” notes Jack Allen of Capital Economics.